Moscow fights back after sanctions; battle rages near Ukraine crash site

By Polina Devitt and Gabriela Baczynska

MOSCOW/KIEV (Reuters) - Russia fought back on Wednesday over new U.S. and EU sanctions imposed over Ukraine even as G7 leaders warned of further steps, while Ukraine's government accused pro-Russian rebels of placing land mines near the site of a crashed Malaysian airliner to prevent a proper investigation.

Russia announced a ban on most fruit and vegetable imports from Poland and said it could extend it to the entire European Union, a move Warsaw called Kremlin retaliation for new Western sanctions over Ukraine imposed on Russia on Tuesday.

Moscow called the new EU and U.S. sanctions "destructive and short-sighted" and said they would lead to higher energy prices in Europe and damage cooperation with the United States on international affairs.

The confrontation between Russia and the West entered a new phase this week, with the United States and European Union taking by far the strongest international steps yet against Moscow over its support for Ukraine's rebels.

The new EU and U.S. sanctions restrict sales of arms and of equipment for the oil industry, while Russian state banks are barred from raising money in Western capital markets.

G7 leaders issued a joint statement on Wednesday warning Russia that it would face added economic sanctions if Moscow does not change course on its Ukraine policy.

The statement from the leaders of the G7 countries - the United States, Canada, France, Germany, Italy, Japan and Britain - was a show of solidarity among allies. They expressed grave concern about Russian actions that have undermined "Ukraine's sovereignty, territorial integrity and independence."

"Russia still has the opportunity to choose the path of de-escalation," the statement said. "If it does not do so, however, we remain ready to further intensify the costs of its adverse actions."

In addition, the European Commission published the names of eight Russians, including some of President Vladimir Putin's associates, and three companies that will have their assets frozen as part of the sanctions. The people on the list include Arkady Rotenberg, who is Putin's long-time judo partner and has been on a U.S. sanctions list since March.

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Russia's President Vladimir Putin (C) chairs a government meeting at the Novo-Ogaryovo state res …

Yury Kovalchuk and Nikolai Shamalov - the two largest shareholders in Bank Rossiya, a St. Petersburg company that expanded rapidly after Putin moved to Moscow and became president in 2000 - were also blacklisted.

The companies named include Russian National Commercial Bank, which was the first Russian bank to go into Crimea after the region's annexation by Russia this year. The other two firms are anti-aircraft weapons maker Almaz-Antey and airline Dobrolyot, which operates flights between Moscow and Simferopol in the Crimea.

FIGHTING NEAR THE CRASH SITE

On the ground in Ukraine, heavy fighting between government forces and separatists has been taking place near the site where Malaysian flight MH17 crashed into wheat and sunflower fields on July 17, shot down by what Washington and Brussels say was a missile supplied by Russia.

Kiev accused the pro-Russian rebels on Wednesday of fortifying the area, including with land mines, to prevent the site from being properly investigated. The land mine report could not be independently confirmed. Ukraine is party to a treaty banning land mines; Russia is not.

Ukrainian military spokesman Andriy Lysenko said the rebels were digging in for battle near the crash site: "They have brought a large number of heavy artillery there and mined approaches to this area. This makes impossible the work of international experts trying to start work to establish the reasons behind the Boeing 777 crash."

The G7 leaders called on all sides to establish a ceasefire at the crash site.

The new Western sanctions mark the first time Washington and Brussels have adopted measures designed to hurt the overall Russian economy, after weeks of narrow steps targeting only specific individuals blamed for Russia's Ukraine policy.

German Economy Minister and Vice Chancellor Sigmar Gabriel said the measures would hurt the European economy but would hurt Russia more. The price was worth paying, he added: "At a time of war and peace, economic policy is not the main consideration."

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Ukrainian Ambassador to the United Nations Yuriy Sergeyev attends a news conference at the United Na …

Even so, Russian markets rallied, as investors deemed the sanctions less severe than feared, with Russian stocks, bonds and the rouble rising.

The first European economic victims of the trade war were Polish apple growers, who sell more than half their exports to Russia. Moscow is by far the biggest importer of EU fruit and vegetables, buying more than 2 billion euros' worth a year.

Russia said the ban, covering most Polish fruit and vegetables, was for sanitary reasons and it would look into expanding it to the rest of the EU.

Moscow denies Western accusations that it has armed and supported rebels who are fighting Ukrainian forces in eastern Ukraine. But Western countries say flows of heavy weapons across the frontier have only increased since the airliner was shot down, killing all 298 people on board.

Lysenko said 363 Ukrainian troops had been killed and 1,434 wounded since Kiev's "anti-terrorist" operation began.

Ukraine's fragile economy is also taking a battering.

Parliament will consider austerity budget amendments on Thursday that are key to receiving IMF support and to assign more financing for the army.

GOVERNMENT TROOPS ADVANCE

Despite what the West says is an increase in armaments for the rebels, government troops have advanced since the start of the month, when they pushed the rebels out of their best-defended stronghold, the town of Slaviansk. Since then, Western countries say thousands of Russian soldiers have returned to the border from which they had withdrawn weeks ago.

NATO military commander General Philip Breedlove said the number of troops along the border was now "well over 12,000", and weaponry was also building up.

Valentyn Nalivaichenko, the head of Ukraine's SBU security service, said arms including Grad multiple rocket launchers were flooding across the border.

"Grads come in from Russian territory, take pre-agreed positions and fire on the Ukrainians. This is hundreds of rocket launches. They come in, shoot around like in a safari. This is serious military aggression," he told a news conference.

The rebels are mainly holed up in the cities of Donetsk and Luhansk, which they have declared capitals of two independent "people's republics", as well as in the surrounding countryside.

The sanctions are intended to persuade Putin to back down from a months-long campaign to seize territory and disrupt his neighbour, a former Soviet state of 45 million where a pro-Russian president was toppled by street protests in February.

But Putin, whose popularity at home has surged since he annexed Ukraine's Crimea peninsula in March, has shown no sign of backing down from support for the rebellion in parts of Ukraine that he has referred to as New Russia.

The EU had been reluctant to impose tighter sanctions - it has 10 times more trade with Russia than the United States does, and all 28 members must agree EU decisions - until the downing of the plane en route from Amsterdam to Kuala Lumpur.

The EU sanctions have nevertheless been crafted so as to inflict the minimum hardship on Europe: Russia's oil industry has been targeted but not the natural gas that fuels European industry and lights its cities. Existing contracts are excluded from the arms embargo, allowing France to move ahead with delivery of a warship it has already sold for the Russian navy.

(Additional reporting by Steve Holland in Washington, Justyna Pawlak, Barbara Lewis and Julia Fioretti in Brussels, Tessa Walsh in London, Elizabeth Piper, Vladimir Soldatkin and Thomas Grove in Moscow, Aleksandar Vasovic in Donetsk and Natalia Zinets in Kiev and Wiktor Szary and Jakub Iglewski in Warsaw; Writing by Peter Graff, Will Waterman and Will Dunham; Editing by James Dalgleish)

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U.S. blacklists North Korea shipping firms over arms shipments

WASHINGTON (Reuters) - The United States on Wednesday blacklisted two North Korean shipping firms that it said tried to conceal arms shipments from Cuba to North Korea, following a similar move by the United Nations.

The ship, Chong Chon Gang, was discovered last July near the Panama Canal hiding a large amount of arms, including two MiG-21 jet fighters under 200,000 bags of sugar, which the United States said showed a clear attempt to circumvent U.N. and U.S. sanctions against North Korea.

North Korea is under an array of sanctions for nuclear and ballistic missile tests since 2006 in defiance of global demands to stop.

"The Chong Chon Gang episode, in which (North Korea) tried to hide an arms shipment under tons of sugar, is a perfect example of North Korea's deceptive activity, and precisely the sort of conduct that we are committed to disrupting," David Cohen, the U.S. Treasury Department's undersecretary for terrorism and financial intelligence, said in a statement.

The Treasury Department imposed sanctions on Chongchongang Shipping Company, which is owned by the North Korean government, and the Ocean Maritime Management Company, which tried to help conceal the weapons and provide false documents to authorities in Panama, Treasury said. It also blacklisted 18 vessels in which the firms have an interest.

The new sanctions freeze any assets the companies may hold in the United States and prohibit people and firms in the United States from dealing with them.

(Reporting by Anna Yukhananov; Editing by Meredith Mazzilli and Tom Brown)

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Temporary ceasefire in Tripoli, 75 bodies found in Benghazi

By Aziz El Yaakoubi and Ayman Al-Warfalli

BENGHAZI/TRIPOLI (Reuters) - Rival Libyan militias fighting for control of Tripoli's airport agreed to a temporary ceasefire on Wednesday to allow firefighters to try to control a huge blaze at a fuel depot hit by a rocket.

Meanwhile in Libya's second city, Benghazi, at least 75 bodies, mostly soldiers, were found after two days of fighting in which Islamist fighters and allied militiamen overran an army base.

The past two weeks of fighting have been the worst since the civil war that ousted Muammar Gaddafi in 2011, prompting Western governments to follow the United States and the United Nations in pulling their diplomats out of the North African country.

Two brigades of former rebels, mainly rooted in the towns of Zintan and Misrata, have pounded each other's positions in Tripoli with Grad rockets, artillery fire and cannon, turning the south of the capital into a battlefield.

But except for sporadic shelling away from the ceasefire zone near the international airport, Wednesday was the quietest day in the capital for two weeks.

"Many mediators have succeeded in convincing the militias to stop fighting, at least temporarily," government spokesman Ahmed Lamin said. "They are trying to get them to the negotiating table, we hope they will agree."

France nevertheless closed its embassy on Wednesday, and evacuated 30 French nationals from Tripoli, a few days after the U.S. embassy evacuated its staff across the Tunisian border under heavy military escort.

It was unclear if the blaze at the airport depot, which supplies millions of liters of gasoline and gas to the capital, was under control on Wednesday, although the volume of smoke had lessened.

A spokesman for the state-run National Oil Corporation (NOC), owner of the tanks' operator, Brega Oil company, said he did not yet have any update on the situation.

Three years after the fall of Gaddafi, Libya's government is unable to impose its authority on numerous brigades of former fighters who remain heavily armed and often make political demands of the state.

Benghazi was also quieter on Wednesday, after fierce battles that led special forces to withdraw from the main army base in the city the previous day.

The Libyan Red Crescent's Mohammed al-Misrati said it had found more than 50 bodies inside the base. "We are trying to get them out," he said.

At least 35 of the bodies were later taken to Benghazi's main hospital, according to a Reuters reporter. Sources in the city's hospitals said they had received at least 25 bodies from fighting in other places.

The forces of the self-declared Benghazi Shura Council, which include former rebels and militants from the al Qaeda-linked Ansar al-Sharia, seized the base on Tuesday after fighting involving rockets and warplanes.

Special forces troops and irregular forces loyal to Khalifa Haftar, a renegade former army general who had launched a campaign to clear Benghazi of Islamist militants, withdrew to an air base outside Benghazi, Haftar's spokesman said.

Benghazi's main police station was also abandoned on Wednesday morning, according to a Reuters reporter at the scene.

Fighters from Ansar al-Sharia, classified as a terrorist organization by Washington, have been blamed by authorities for an attack on the U.S. consulate in Benghazi in 2012 in which the U.S. ambassador was killed.

(Editing by Patrick Markey and Kevin Liffey)

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Hezbollah commander killed in Iraq: sources

BEIRUT (Reuters) - A Hezbollah commander has died during a mission in Iraq, sources familiar with the incident said on Wednesday, indicating the Lebanese group that is already fighting in Syria's civil war may be involved in a second conflict in the region.

Hezbollah, an Iranian-backed Shi'ite Islamist group, has not previously announced any role in the conflict in Iraq, which escalated last month when radical Sunni militants seized large areas of territory from the Shi'ite-led government in Baghdad.

Four sources in Lebanon named the Hezbollah commander as Ibrahim al-Haj, a technical specialist involved in training. They said he was "martyred" in a battle near Mosul, a city in northern Iraq seized from government control last month by an al Qaeda offshoot known as the Islamic State.

His funeral was held on Wednesday in the village of Qilya in the Bekaa Valley. A Hezbollah official contacted by Reuters declined to comment.

Hezbollah's deployment in Syria has helped President Bashar al-Assad's government firm up its grip on power by reestablishing control over a strategic corridor of territory stretching north from Damascus. The group says it is fighting in Syria against the threat posed by radical Sunni militants.

Assad is an ally of Iran and a member of the Alawite sect that is an offshoot of Shi'ite Islam. Tehran also has longstanding ties to Shi'ite politicians in Iraq.

Hezbollah was founded with Iranian help in the early 1980s and fought to drive out Israeli forces that occupied southern Lebanon until 2000. The most powerful group in Lebanon, it also fought a war with Israel in 2006.

(Reporting by Laila Bassam; Writing by Tom Perry, Editing by Angus MacSwan)

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Gaza toll soars as Israel 'days' from completing tunnel hunt

By Nidal al-Mughrabi and Dan Williams

GAZA/JERUSALEM (Reuters) - Israel pressed ahead with its Gaza offensive saying it was days from achieving its core goal of destroying all Islamist guerrilla cross-border attack tunnels, but a soaring Palestinian civilian toll has triggered international alarm.

Prime Minister Benjamin Netanyahu's security cabinet on Wednesday approved continuing the assault launched on July 8 in response to a surge of rocket attacks by Gaza's dominant Hamas Islamists. But Israel also sent a delegation to Egypt, which has been trying, with Washington's blessing, to broker a ceasefire.

Gaza officials say at least 1,361 Palestinians, most of them civilians, have now been killed in the battered enclave. Israel has lost 56 soldiers to Gaza clashes and three civilians to Palestinian shelling.

U.N. Secretary-General Ban ki-Moon was incensed on Wednesday at the deaths of at least 15 Palestinians among thousands sheltering at a school whose U.N. administrator said appeared to have been hit by Israeli artillery.

"It is outrageous. It is unjustifiable. And it demands accountability and justice," Ban said.

Israel said its forces were attacked by guerrillas near the school, in northern Jabalya, and had fired back. It did not immediately comment on another incident, in nearby Shejaia, in which Palestinian officials said 17 people were killed by Israeli shelling near a produce market.

"Such a massacre requires an earthquake-like response," said Hamas spokesman Fawzi Barhoum, whose group has kept up dozens of daily rocket launches deep into Israel. The Israelis have kept casualties from the salvoes low with nine Iron Dome interceptor batteries and air-raid sirens that send people to shelters.

Rolling Israeli ground assaults on residential areas, prefaced by mass-warnings to evacuate, have displaced more than 200,000 of Gaza's 1.8 million Palestinians. The tiny territory's infrastructure is in ruin, with power and water outrages.

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Palestinians gather near the minaret of a mosque that police said was destroyed by an Israeli Air st …

Israel says it is trying to avoid civilian casualties and blames these on Hamas and other Palestinian factions dug-in for urban combat.

Both sides have voiced openness to a truce, but their terms diverge dramatically. Israel wants Gaza stripped of infiltration tunnels and rocket stocks. Hamas rules that out, and seeks an end to a crippling Gaza blockade enforced by Israel and Egypt, which view the Palestinian Islamists as a security threat.

The negotiations are further complicated by the fact Israel and the United States shun Hamas as a terrorist group, while the go-betweens - Egypt, Qatar and Turkey - disagree on Gaza policy.

TUNNEL HUNT

In the absence of a deal, Israel has ordered its ground forces to focus on locating and destroying a warren of tunnels with which Hamas has menaced its southern towns and army bases.

Major-General Sami Turgeman, chief of Israeli forces in Gaza, said on Wednesday they were "but a few days away from destroying all the attack tunnels". The army said 32 of the secret passages had been found so far and half of them blown up.

Three Israeli soldiers were killed on Wednesday by a booby trap detonated as they uncovered a tunnel shaft, the army said. Military losses are more than five times those from the last Gaza ground war, in 2008-2009, but Israeli opinion polls show strong public support for fighting on until Hamas is quelled.

Netanyahu faces intense pressure from abroad to stand down, however. The United States and the U.N. Security Council have urged an immediate, unconditional ceasefire by both sides in Gaza to allow in humanitarian relief and for further talks on a more durable cessation of hostilities.

The White House on Wednesday voiced worry at the deaths in Jabalya and other U.N.-run shelters shelled during the clashes.

"We are extremely concerned that thousands of internally displaced Palestinians who have been called on by the Israeli military to evacuate their homes are not safe in U.N.-designated shelters in Gaza," said National Security Council spokeswoman Bernadette Meehan.

"We also condemn those responsible for hiding weapons in United Nations facilities in Gaza," she added, referring to three cases in which the UNRWA aid agency reported rockets found at its schools.

Separately, the Pentagon said it had allowed Israel to stock up on grenades and mortar rounds from a U.S. munitions store located in Israel as part of bilateral emergency preparedness arrangement.

Israel briefly observed a July 15 ceasefire proposed by Egypt, but Hamas continued attacks, saying its conditions had been ignored. Egyptian officials say they put together a revised truce plan this week that had been provisionally accepted by Israel, though Hamas was still undecided.

However, an Israeli security cabinet minister, Gilad Erdan, denied on Wednesday that his side was suing for a truce.

"We are not looking for a ceasefire, though of course military manoeuvres are supposed to be followed by diplomatic manoeuvres," Erdan said. "But a ceasefire must fulfil Israel's terms, a long-term calm and the demilitarization of Gaza."

(Writing by Dan Williams; Editing by Michael Perry)

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EU and U.S. announce new sanctions on Russia over Ukraine

By Justyna Pawlak and Eric Beech

BRUSSELS/WASHINGTON (Reuters) - The European Union and the United States on Tuesday announced further sanctions against Russia, targeting its energy, banking and defense sectors in the strongest international action yet over Moscow's support for rebels in eastern Ukraine.

The measures mark the start of a new phase in the biggest confrontation between Moscow and the West since the Cold War, which worsened dramatically after the downing of Malaysian flight MH17 over rebel-held territory on July 17 by what Western countries say was a Russian-supplied missile.

"If Russia continues on this current path, the costs on Russia will continue to grow," President Barack Obama said in Washington.

"Russia's actions in Ukraine and the sanctions that we've already imposed have made a weak Russian economy even weaker," he said.

In Brussels, diplomats said ambassadors from the 28-member European bloc agreed to restrictions on trade of equipment for the oil and defense sectors, and "dual use" technology with both defense and civilian purposes. Russia's state run banks would be barred from raising funds in European capital markets. The measures would be reviewed in three months.

German Chancellor Angela Merkel, who had been reluctant to step up sanctions before the crash because of her country's trade links with Russia, said the latest EU measures were "unavoidable".

Previously Europe had imposed sanctions only on individuals and organizations accused of direct involvement in threatening Ukraine, and had shied away from wider "sectoral sanctions" designed to damage its biggest energy supplier.

The new measures were coordinated with Washington in the hope that Russian President Vladimir Putin will back down from a months-long campaign to seize territory and disrupt Ukraine, whose pro-Moscow leader was toppled in February.

But Putin has shown no sign of backing down. Indeed, despite the international condemnation following the downing of the airliner, Western countries say the Kremlin has stepped up support for separatists by sending them more heavy weaponry.

Moscow denies it is arming the rebels, protestations that are ridiculed in the West.

On the ground on Tuesday, intense fighting between government troops and pro-Russian rebels killed dozens of civilians, soldiers and rebels over the past 24 hours, as Kiev pressed on with an offensive to defeat the Moscow-backed revolt.

Shells hit the center of Donetsk, a city with a pre-war population of nearly a million people where residents fear they will be trapped on a battlefield between advancing Ukrainian troops and Russian-backed rebels who have vowed to make a stand.

Ukrainian forces have been pushing rebel units back toward their two main urban strongholds of Donetsk and Luhansk and have sought to encircle them in several places.

The government says its forces have retaken several villages in the rolling countryside near where the airliner crashed, killing all 298 passengers, most of them Dutch.

"DEATH ROW"

In Donetsk, the body of a dead man lay in rubble behind a badly damaged 10-storey residential building close to the city center, hit by shelling. Rebels at the scene placed body parts on a nylon sheet and carried it on a stretcher to a green van.

"There, that's their 'separatists'. That's their 'rebel commander'," said a distressed woman in her 60s, gesturing toward the body. "They are killing neighbors. They are killing people, ordinary people."

Another middle-aged woman, who gave her name as Katarina, charged out of the building next door carrying two bags.

"No more! I cannot live in this death row any more!" she said. "I am leaving! I don't know where!"

Donetsk officials said two people were killed in the shelling of the city.

Municipal officials said up to 17 people, including children, were killed in fighting on Monday evening in the town of Horlivka, a rebel stronghold north of Donetsk that saw fierce battles between the rival forces in the last few days.

In the city of Luhansk, officials said five civilians were killed when shelling hit a retirement home.

"The enemy is throwing everything it has into the battle to complete encirclement of the DNR," Igor Strelkov, a Muscovite rebel commander, told journalists in Donetsk on Monday evening, referring to the self-proclaimed "Donetsk People's Republic".

A rebel source in Donetsk said reinforcements including military equipment and fighters had arrived across the border from Russia. Reuters was not able to confirm that independently.

A spokesman for Ukraine's Security Council, Andriy Lysenko, blamed Russia for shelling a Ukrainian border crossing point and military positions from across the border to help the rebels. Moscow has also accused Ukraine of firing across the frontier.

Washington says the airliner was almost certainly shot down accidentally by rebels using a Russian missile.

BANKING, TECHNOLOGY, ARMS

Leaders of the United States and major European powers agreed in a teleconference on Monday to impose sanctions on Russia's banking, technology and arms sectors.

The U.S. Treasury imposed sanctions on more Russian banks, targeting VTB, the Bank of Moscow, and the Russian Agriculture Bank, as well as the United Shipbuilding Corp.

Winning support from the EU for sanctions was the trickier task, because the European bloc does more than 10 times as much trade with Russia as the United States does and its 28 member states must agree unanimously on any measures.

To mitigate the impact on Europe's own economy, the new sanctions will not affect previous contracts, which means France will be allowed to go ahead with delivery of a naval helicopter carrier it has already sold to Russia. Russia's oil industry has been targeted but its natural gas, which powers European industry and lights its cities, has been spared.

Russia is the world's biggest exporter of natural gas and second biggest exporter of oil.

Still, some European countries and companies will face real pain. British energy giant BP, the biggest foreign investor in Russia with a near 20 percent stake in Russia's biggest oil company Rosneft, complained its business could be hurt.

London's financial services hub could face disproportionate harm from measures against Russian banks. German manufacturing firms could lose customers. European banks and other creditors that are owed money by Russians may face a greater risk that clients will have trouble refinancing or repaying their loans.

"These sanctions are harder than anything we have ever had before," said James Nixey of British think tank Chatham House. "It will hurt a little bit but it's a down payment on the future security of Europe. It's a question of Western credibility."

Meanwhile on the ground, fighting has only intensified since the air crash, with Ukrainian government forces trying to press on with an offensive that saw them push rebels out of their bastion of Slaviansk at the start of the month.

Rebels who retreated from Slaviansk to Donetsk say they will make a stand inside the city. Fighting has also intensified in towns and villages near the border, where the government aims to block rebel reinforcements and arms shipments from Russia.

Ukraine military spokesman Lysenko said 10 Ukrainian soldiers were killed over the last 24 hours. Rebel commander Strelkov said his side had lost 30 fighters killed and wounded.

Plans to open a humanitarian corridor in Luhansk to allow residents to flee the fighting failed. The United Nations says more than 100,000 people have already fled the east so far.

Violence in the region also frustrated international experts' efforts to access the plane crash site for a third day. A Dutch police mission said it abandoned plans to travel there on Tuesday because of fighting along the route.

Fighting has impeded recovery of some of the remains from flight MH17 and made it impossible to reach the site to investigate the cause of the crash. Kiev and the rebels accuse each other of fighting in the area to keep inspectors away.

(Additional reporting by Natalia Zinets and Gabriela Baczynska in Kiev, Barbara Lewis, Julia Fioretti and Tom Koerkemeier in Brussels and Anthony Deutsch in Amsterdam; Writing by Peter Graff; Editing by Giles Elgood)

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U.S. nuclear negotiator declines setting deadline on Iran deal

By Patricia Zengerle

WASHINGTON (Reuters) - The lead U.S. nuclear negotiator declined to give a final deadline on Tuesday for negotiating a final nuclear agreement with Iran, but said participants mean to finish the international talks at the end of the current four-month extension.

"Our intent is absolutely to end this on Nov. 24 in one direction or another. But what I can say to you is we will consult Congress along the way," Wendy Sherman, the under secretary of State for political affairs, said at a Senate Foreign Relations Committee hearing.

Iran and six world powers agreed to extend nuclear talks, and the temporary agreement, by four months after they failed to reach a July 20 deadline for a long-term deal. The deal would gradually lift sanctions, which have crippled Iran's economy, in exchange for curbs on Tehran's atomic program.

Many members of the U.S. Congress are skeptical about the talks and say they are concerned that Iran is negotiating only to win lighter sanctions while secretly continuing its pursuit of a nuclear weapon.

"I've been skeptical of the Iranians' sincerity from day one. And I cannot say that I am any less skeptical today than I was six months ago," said New Jersey Democratic Senator Robert Menendez, chairman of the Foreign Relations panel.

Sherman declined to discuss in the public hearing how long a final comprehensive agreement with Iran, including invasive inspections of its nuclear facilities, should last.

She said only, "We believe the duration of this should be at least double-digits. And we believe it should be for quite a long time."

Several committee Republicans said they were unhappy with the status of the talks. "The goalposts keep moving," said one, Tennessee Senator Bob Corker who is the party's leader on the panel.

(Reporting by Patricia Zengerle; Editing by Grant McCool)

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Sierra Leone's top Ebola doctor dies from virus

By Umaru Fofana and Adam Bailes

FREETOWN (Reuters) - The doctor leading Sierra Leone's fight against the worst Ebola outbreak on record died from the virus on Tuesday, the country's chief medical officer said.

The death of Sheik Umar Khan, who was credited with treating more than 100 patients, follows those of dozens of local health workers and the infection of two American medics in neighboring Liberia, highlighting the dangers faced by staff trying to halt the disease's spread across West Africa.

Ebola is believed to have killed 672 people in Guinea, Liberia and Sierra Leone since the outbreak began in February, according to the World Health Organisation.

The contagious disease, which has no known cure, has symptoms that include vomiting, diarrhea and internal and external bleeding. The fatality rate of the current outbreak is around 60 percent although Ebola can kill up to 90 percent of those who catch it.

The 39-year-old Khan, hailed as a "national hero" by the Health Ministry, had been moved to a treatment ward run by the medical charity Medecins Sans Frontieres in the far north of Sierra Leone.

He died less than a week after his diagnosis was announced, and shortly before President Ernest Bai Koroma arrived to visit his treatment center in the northeastern town of Kailahun.

"It is a big and irreparable loss to Sierra Leone as he was the only specialist the country had in viral hemorrhagic fevers," said the chief medical officer, Brima Kargbo.

FOOTBALL BAN

Weak health systems are struggling to contain the disease despite international help ranging from doctors to safety equipment.

Guinea, where the outbreak originated, has seen new cases in the capital Conakry and in the eastern mining town of Siguiri, where a new isolation ward has opened. In both areas, the infection spread through contact with visitors from Sierra Leone, according to Aboubacar Sidiki Diakite, who leads Guinea's efforts to stop the outbreak.

In neighboring Liberia, the national soccer authority suspended matches nationwide, a spokesman said.

While the WHO has stopped short of recommending travel restrictions, the Togolese airline Asky has suspended flights to and from Sierra Leone and Liberia as concern over the spread of the virus has increased since the first death was reported last week in Nigeria's coastal city of Lagos, home to 21 million people.

The dead man was Patrick Sawyer, a consultant for Liberia's Finance Ministry in his 40s who had flown to Nigeria with Asky via its home hub, Lome.

His wife Decontee told the U.S. channel NBC News on Tuesday that he was an American from Minnesota.

Asky said it would no longer take on food in Guinea, and that passengers leaving the Guinean capital Conakry would be checked for signs of the disease before departure.

The airline added that medical teams would be deployed to screen passengers in transit through Lome.

Nigeria's largest carrier, Arik Air, has suspended flights to Liberia and Sierra Leone because of the Ebola risk.

On Monday, a U.S. administration official said President Barack Obama was receiving updates and noted that U.S. agencies had stepped up assistance to help contain the virus.

(Additional reporting by Emma Farge and Bate Felix in Dakar and Clair MacDougall in Monrovia; Writing by David Lewis and Daniel Flynn; Editing by Kevin Liffey)

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21 Palestinians killed as Israel pounds Gaza on Wednesday

By Nidal al-Mughrabi and Ori Lewis

GAZA/JERUSALEM (Reuters) - Israeli fire killed at least 21 Palestinians in the Gaza Strip early on Wednesday as the Jewish state said it targeted Islamist militants at dozens of sites across the coastal enclave, while Egyptian mediators prepared a revised ceasefire proposal.

Israel's Channel Two TV said progress was being made to achieve a deal in Cairo, where a Palestinian delegation was expected to arrive for discussions.

Israeli tank shells pounding houses in eastern Jebalya in the northern Gaza Strip killed 13 people and wounded many others, health ministry spokesman Ashraf Al-Qidra said. Among the dead were a medic and an infant, he said.

Eight people, including five members of the same family in Jebalya, were killed in other strikes across the Gaza Strip.

Gaza hospital officials put the total number of Palestinians killed in the conflict at 1,224, most of them civilians. On the Israeli side, 53 soldiers and three civilians have been killed since the start of the offensive on July 8.

Israel launched its offensive in response to rocket salvoes fired by Gaza's dominant Hamas Islamists and their allies.

UNRWA, the main U.N. relief agency in Gaza, said it was at "breaking point" with more than 200,000 Palestinians having taken shelter in its schools and buildings following calls by Israel for civilians to evacuate whole neighborhoods before military operations.

The Israeli assault intensified after the deaths of 10 soldiers in Palestinian cross-border attacks on Monday; Prime Minister Benjamin Netanyahu warned of a long conflict ahead.

The army said it needed about a week to complete its main mission of destroying cross-border infiltration tunnels, and there has been strong Israeli public support for holding course.

In a bid to boost Palestinian spirits and demoralize Israel, Hamas TV aired footage it said showed the group's fighters using a tunnel to reach an Israeli army watchtower on Monday. They are seen surprising an Israeli sentry, opening fire and storming the watchtower compound to surround a fallen soldier.

Mohammed Deif, the shadowy leader of Hamas's armed wing, said in a recorded message in a television broadcast that Palestinians would continue confronting Israel until its blockade on Gaza - which is supported by neighboring Egypt - was lifted.

"The occupying entity will not enjoy security unless our people live in freedom and dignity," Deif said. "There will be no ceasefire before the (Israeli) aggression is stopped and the blockade is lifted. We will not accept interim solutions."

ISRAEL DEMANDS DISARMAMENT

Israel has balked at freeing up Gaza's borders under any de-escalation deal unless Hamas's disarmament is also guaranteed.

Egypt said on Tuesday it was revising an unconditional truce proposal that Israel had originally accepted but Hamas rejected, and that the new offer would be presented to a Palestinian delegation expected in Cairo. An Israeli official said Israel might send its own envoy to Cairo.

"We are hearing that Israel has approved a ceasefire but Hamas has not," an Egyptian official told Reuters, an account that the Netanyahu government neither confirmed nor denied.

The U.S.-backed administration of Palestinian President Mahmoud Abbas in the Israeli-occupied West Bank voiced support on Tuesday for a 24-72 hour ceasefire. It said it was also speaking for Hamas and Islamic Jihad in the Gaza Strip.

Hamas spokesman Sami Abu Zuhri disputed that statement but confirmed there were "intensive, ongoing contacts" on a truce.

Outside pressure has been building on Netanyahu to rein in his forces, while few Israelis want the operation to end now.

A Tel Aviv University poll published on Tuesday found 95 percent of Israel's Jewish majority felt the offensive was justified. Only 4 percent believed too much force had been used.

Both U.S. President Barack Obama and the U.N. Security Council have called for an immediate ceasefire to allow relief to reach Gaza's 1.8 million Palestinians, followed by negotiations on a more durable end to hostilities.

Efforts led by U.S. Secretary of State John Kerry last week failed to achieve a breakthrough, and the explosion of violence appeared to dash international hopes of turning a brief lull for the Muslim Eid al-Fitr festival into a longer-term ceasefire.

Hamas preaches the Jewish state's destruction but has been open to long-term ceasefires in the past. Since it is shunned by the United States and Israel as a terrorist group, Kerry's mediation has been facilitated by Egypt, Turkey, Qatar and Abbas.

POWER STATION KNOCKED OUT

Thick black smoke rose from blazing fuel tanks at Gaza's only power station which Israel knocked out on Tuesday. Officials said the plant could be out of action for a year.

Electricity was cut to the city of Gaza and many other parts of the Hamas-dominated territory after what officials said was Israeli tank shelling of the tanks containing about 3 million liters of diesel fuel.

"The power plant is finished," said its director, Mohammed al-Sharif. An Israeli military spokeswoman had no immediate comment and said she was checking the report.

Palestinians launched 54 rockets toward southern and central Israel, including the Tel Aviv and Jerusalem area, on Tuesday, the military said, adding that five were shot down by Iron Dome interceptors while the rest fell wide, causing no damage.

The Israeli military said soldiers killed five gunmen who opened fire after emerging from a tunnel inside the Gaza Strip and that 110 targets were struck in the enclave on Tuesday.

(Writing by Ori Lewis; Editing by Mohammad Zargham)

• Unrest, Conflicts & War
• Politics & Government
• Gaza Strip
• Israel
• Palestinians

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At least 24 reported killed in Guinea beach concert stampede

CONAKRY (Reuters) - At least 24 people were killed in a stampede at a beachside concert celebrating the end of Ramadan in Guinea's capital, news agency AFP said, with Guinea's Presidency declaring a week of mourning after what it described as a "tragic drama".

A statement from the Presidency said the incident occurred at a beach in the Ratoma neighborhood of the capital, Conakry. It noted some deaths and injuries but did not give a death toll.

"While waiting for the results of an investigation, information from health and security authorities indicate deaths and several injuries," the Presidency said late on Tuesday.

AFP quoted Guinean hospital officials on the number of people killed.

The stampede, which occurred during celebrations to mark the end of the holy fasting month of Ramadan in mainly Muslim Guinea, comes at a time when health workers are already stretched by an outbreak of Ebola.

The deadly tropical virus was first detected in the poor, mineral-rich West African country in February and has since spread to Liberia and Sierra Leone, killing more than 670 people, according to the World Health Organization.

(Reporting by Saliou Samb; Writing by Emma Farge; Editing by Paul Tait)

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U.S. 'disappointed' Netherlands released Venezuelan wanted over drugs

By Patricia Zengerle

WASHINGTON (Reuters) - The United States is "deeply disappointed" the Netherlands released a former Venezuelan military intelligence chief detained over U.S. drug trafficking allegations, and is "disturbed" at reports indicating Caracas used threats to obtain his freedom, the State Department said on Monday.

Instead of being extradited to the United States, retired Venezuelan General Hugo Carvajal flew home on Sunday from the Netherlands' Caribbean island of Aruba after the Dutch government ruled he had diplomatic immunity. He had been arrested on Aruba on Wednesday.

The Wall Street Journal reported on Monday that Carvajal's release came after Venezuela raised economic and military pressure on two Dutch islands in the Caribbean.

The newspaper quoted Aruba's chief prosecutor, Peter Blanken, as saying Venezuelan navy ships neared Aruba and Curaçao over the weekend as Dutch officials were considering how to deal with Carvajal.

"The threat was there," Blanken was quoted as saying.

Jubilant Venezuelan officials hailed Carvajal's release at a ruling Socialist Party congress, calling it a "victory" over U.S. ideological foes.

"We made a legitimate request for Carvajal's arrest in conformity with our treaty which governs extraditions between the United States, the Netherlands, and Aruba," State Department spokeswoman Jen Psaki said at a daily news briefing. She said Washington viewed Carvajal's claims of immunity as "beyond established international norms."

Opposition politicians in Venezuela and the U.S. government say Carvajal, who ran military intelligence from 2004 to 2008, bears responsibility for years of state connivance in the illegal drug trade.

Washington put Carvajal on a blacklist in 2008, accusing him of protecting cocaine shipments from seizure by Venezuela anti-narcotics authorities and providing weapons and shelter to Colombia's FARC rebels.

Carvajal denies those charges.

'VICTORY' OVER U.S.

The State Department said Washington would continue efforts to bring Carvajal to justice, blaming Caracas for his release. "We are also disturbed by credible reports that have come to us indicating the Venezuelan government threatened the governments of Aruba, the Netherlands, and others to obtain this result," Psaki said. "This is not the way law enforcement matters should be handled." She did not elaborate on the nature of the purported threats or the source of the reports beyond saying they were "more than media reports."

Carvajal was considered one of the most powerful figures during the rule of the late socialist President Hugo Chavez, a U.S. antagonist.

The case had threatened a new flare-up in tense relations between Caracas and Washington, as well as potentially stirring up accusations of officially sanctioned drug trading by Venezuela.

Carvajal himself accused authorities in Aruba of corruption during a brief appearance on stage next to Venezuelan President Nicolas Maduro at the Socialist Party Congress on Sunday night.

"The judge and the prosecutor who proceed with my case are corrupt. I suspect they received money for what they did to me," he said. Carvajal gave no evidence to back up that accusation.

(Additional reporting by Andrew Cawthorne in Caracas; Editing by Jonathan Oatis, Peter Cooney and Mohammad Zargham)

• Politics & Government
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• State Department
• Aruba
• Netherlands
• Venezuela

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West agrees wider Russia sanctions as Kiev says forces near crash site

By Gabriela Baczynska and Aleksandar Vasovic

KIEV/DONETSK Ukraine (Reuters) - U.S. and European leaders agreed on Monday to impose wider sanctions on Russia's financial, defense and energy sectors as Ukraine said its forces advanced toward the crash site of Malaysian flight MH17.

The new sanctions, which U.S. President Barack Obama and leaders of Germany, Britain, France and Italy discussed in a conference call, are aimed at increasing the pressure on Russian President Vladimir Putin after the Malaysian airliner was shot down over territory held by pro-Moscow rebels in eastern Ukraine.

"It's precisely because we've not yet seen a strategic turn from Putin that we believe it's absolutely essential to take additional measures and that's what the Europeans and the United States intend to do this week," said Tony Blinken, a national security adviser to Obama.

The crash earlier this month has led to calls for much tougher action against Russia from Western countries who had previously imposed sanctions but only on small numbers of individuals and firms. EU member states were expected to try to reach a final deal on Tuesday on stronger measures that would include closing the bloc's capital markets to Russian state banks, an embargo on future arms sales and restrictions on energy technology and technology that could be used for defense.

In Brussels, EU sources said diplomats had reached preliminary agreement on a new list of companies and people, including associates of Putin, to be targeted by asset freezes.

Western states believe that the rebels brought down Malaysia Airlines flight MH17, with the loss of 298 lives, using a missile supplied by Russia.

"The latest information from the region suggests that even since MH17 was shot down, Russia continues to transfer weapons across the border and to provide practical support to the separatists," said a statement issued by British Prime Minister David Cameron after the leaders' call.

"Leaders agreed that the international community should therefore impose further costs on Russia and specifically that ambassadors from across the EU should agree a strong package of sectoral sanctions as swiftly as possible."

Russia has blamed the Ukrainian military for the tragedy, which deepened a crisis that erupted when a pro-Moscow Ukrainian president was forced from power and Russia annexed Crimea in March.

Earlier in the day, Russian Foreign Minister Sergei Lavrov said sanctions imposed by the United States and the EU on officials and companies would not achieve their goal.

"We will overcome any difficulties that may arise in certain areas of the economy, and maybe we will become more independent and more confident in our own strength," he told a news conference.

GOVERNMENT FORCES ADVANCE

The Ukrainian government said on Monday its troops had wrested more territory from the rebels and were moving towards the crash site which international investigators said they could not reach because of the fighting.

Troops recaptured two rebel-held towns near the site and were trying to take the village of Snezhnoye, near where Kiev and Washington say rebels fired the surface-to-air missile that shot down the airliner, Ukrainian officials said.

One pro-government militia said 23 of its men had been killed in fighting in the past 24 hours, while a rebel commander said he had lost 30 soldiers.

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A woman walks past armed pro-Russian separatists who stand guard on the suburbs of Shakhtarsk, Donet …

Analysis of black box flight recorders from the airliner showed it was destroyed by shrapnel from a missile blast which caused a "massive explosive decompression", a Ukrainian official said on Monday.

Investigators in Britain, who downloaded the data, had no comment. They said they had passed information to the international crash investigation led by the Netherlands, whose nationals accounted for two-thirds of the victims.

In a report on three months of fighting between government forces and separatist rebels who have set up pro-Russian "republics" in the east, the United Nations said more than 1,100 people had been killed.

U.N. High Commissioner for Human Rights Navi Pillay said increasingly intense fighting in the Donetsk and Luhansk regions was extremely alarming and the shooting down of the airliner on July 17 may amount to a war crime.

The separatists are still in control of the area where the plane was shot down but fighting in the surrounding countryside has been heavy as government forces try to drive them out.

On Monday at least three civilians were reported killed in overnight fighting, and Kiev said its troops recaptured Savur Mogila, a strategic piece of high ground about 30 km (20 miles) from where the Boeing hit the ground, and other areas under rebel control. Rebels denied Savur Mogila had been lost, saying fighting was continuing.

The crash site has yet to be secured or thoroughly investigated, more than 10 days after the crash. After days in which bodies lay untended in the sun, rebels gathered the human remains and shipped the bodies out, and turned over the flight recorders to a Malaysian delegation.

But the wreckage itself is still largely unguarded, and much of it has been moved or dismantled in what the rebels say was part of the operation to recover the bodies. No full forensic sweep has been conducted to ensure all human remains have been collected. Both side accuse the other of using fighting to prevent the investigation.

The Organization for Security and Co-operation in Europe said its observers attempting to reach the crash site with investigators from Australia and the Netherlands were forced to return to Donetsk for "security reasons".

A rebel leader, Vladimir Antyufeyev, told reporters in Donetsk that separatist fighters escorting the international experts to the site encountered fighting and turned back.

Antyufeyev, who like most of the senior rebel leadership is an outsider from Russia, also blamed the "senseless" Ukrainian army for trying to destroy evidence at the crash site under cover of fighting.

(Additional reporting by Roberta Rampton and Steve Holland in Washington, Natalia Zinets in Kiev, Justyna Pawlak, Barbara Lewis and Tom Koerkemeier in Brussels, Jane Wardell in Sydney, Alexei Anishchuk and Thomas Grove in Moscow, William James in London, and Anthony Deutsch in Amsterdam; Writing by Giles Elgood and David Stamp; Editing by Peter Graff)

• Politics & Government
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• President Barack Obama

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Iraq lays claim to Kurdish crude cargo in Texas court

HOUSTON (Reuters) - Iraq filed suit on Monday in a Texas court to gain control of a cargo of crude oil from Iraqi Kurdistan that Baghdad says was sold without its permission.

The United Kalavrvta tanker, carrying some 1 million barrels of crude worth about $100 million, arrived off the coast of Texas on Saturday but has yet to unload its disputed cargo.

The ship, which is too large to enter the port of Galveston near Houston, was given clearance by the U.S. Coast Guard on Sunday to transfer its cargo offshore to smaller boats that would deliver it to the U.S. mainland.

Iraq, in its filing in U.S. District Court for the Southern District of Texas, asked for an order allowing the cargo to be seized by the U.S. Marshals Service.

Sale of Kurdish crude oil to a U.S. refinery would infuriate Baghdad, which sees such deals as smuggling.

The U.S. State Department has expressed fears that independent oil sales from Kurdistan could contribute to the breakup of Iraq, said the oil belongs to all Iraqis, and warned potential buyers of legal risks.

But it has also made clear it will not intervene in a commercial transaction.

AET Offshore Services, a company in Texas hired to unload the tanker, asked in a separate court filing in U.S. district court on Monday if Iraq's claims were valid.

The court filings did not name the end-buyer of the cargo. AET Offshore is an intermediary.

Piecemeal oil exports have gone from Iraqi Kurdistan to Turkey and Iran by truck in the past, which Baghdad also opposed. But the opening of a new pipeline to Turkey earlier this year, which could supply the Kurds with far greater revenues, has met much fiercer opposition from Baghdad.

One cargo of Kurdish crude was delivered in Houston in May to an unidentified buyer, and four other cargoes of Kurdish crude have been delivered so this year in Israel.

The case is Ministry of oil of the Republic of Iraq v. Ministry of Natural Resources of Kurdistan Regional Governate of Iraq et al, U.S. District Court, Southern District of Texas, No. 3:14-cv-00249

(Reporting by Jonathan Stempel in New York, David Ingram and Rebecca Elliott in Washington, and Terry Wade, Anna Driver and Erwin Seba in Houston; Editing by Lisa Shumaker)

• Business
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• crude oil
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• Iraqi Kurdistan
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Israel strikes house of Hamas Gaza leader, digs in for long fight

By Nidal al-Mughrabi and Ori Lewis

GAZA/JERUSALEM (Reuters) - Israel's military pounded targets in the Gaza Strip on Tuesday after Prime Minister Benjamin Netanyahu said his country needed to be prepared for a long conflict in the Palestinian enclave, squashing any hopes of a swift end to 22 days of fighting.

In the latest development, Israeli aircraft fired a missile at the house of Hamas Gaza leader Ismail Haniyeh before dawn on Tuesday causing damage but no casualties, Gaza's interior ministry said.

An Israeli military spokeswoman had no information on the report but was checking for details.

Eleven people were killed in a strike on a house in the Bureij refugee camp in Gaza City as Israeli forces hit targets across the territory in the most widespread night of attacks in the coastal enclave so far.

Hamas said that its broadcast outlets, Al-Aqsa TV and Al-Aqsa Radio were also targeted. The television station continued to broadcast, but the radio station went silent.

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An Israeli mobile artillery unit fires towards the Gaza Strip July 28, 2014.REUTERS/Baz Ratner

Israel launched its Gaza offensive on July 8, saying its aim was to halt rocket attacks by Hamas and its allies. It later ordered a land invasion to find and destroy the warren of Hamas tunnels that crisscrosses the border area.

In a televised address on Monday night, a grim-faced Netanyahu said any solution to the crisis would require the demilitarization of the Palestinian territory, which is controlled by Hamas Islamists and their militant allies.

"We will not finish the mission, we will not finish the operation without neutralizing the tunnels, which have the sole purpose of destroying our citizens, killing our children," Netanyahu said, adding that it had been a "painful day."

An opinion poll broadcast by Israel's Channel 10 television showed overwhelming Israeli public support for continuing the Gaza offensive until Hamas is "disarmed."

As night fell over Gaza, army flares illuminated the sky and the sound of intense shelling could be heard. The military warned thousands of Palestinians to flee their homes in areas around Gaza City - usually the prelude to major army strikes.

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An Israeli mobile artillery unit fires towards the Gaza Strip July 28, 2014. REUTERS/Baz Ratner

"We need to be prepared for a protracted campaign. We will continue to act with force and discretion until our mission is accomplished," Netanyahu said.

A number of rockets fired from Gaza were launched toward various regions in southern and central Israel, including the Tel Aviv area. At least one of the rockets was intercepted by the Iron Dome system. No casualties or damage were reported.

Some 1,087 Gazans, most of them civilians, have died in the 22-day-old conflagration. Israel has lost 48 soldiers and another three civilians have been killed by Palestinian shelling.

The explosion of violence, after a day of relative calm on Sunday, appeared to wreck international hopes of turning a brief lull in fighting into a longer-term ceasefire.

Gaza's dominant Hamas Islamists said they had accepted a U.N. call for a pause in hostilities on Monday to coincide with Eid, which marks the end of the fasting month of Ramadan.

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A Israeli soldier looks at shells next to a mobile artillery unit outside the Gaza Strip July 28, 20 …

Israel initially balked, having abandoned its own offer to extend a 12-hour truce from Saturday when Palestinian rockets kept flying. However, calm gradually descended through the night with just the occasional exchange of fire heard until a series of blasts shook Gaza in the afternoon.

INTERNATIONAL PRESSURE

Foreign pressure has been building on Netanyahu to muzzle his forces, with both U.S. President Barack Obama and the U.N. Security Council urging an immediate ceasefire that would allow relief to reach Gaza's 1.8 million Palestinians, followed by negotiations on a more durable cessation of hostilities.

Israel wants guarantees Hamas will be stripped of its tunnels and rocket stocks. It worries the Palestinian Islamists will parlay the truce talks mediated by their friends in Qatar and Turkey into an easing of an Israeli-Egypt blockade on Gaza.

In his television address, Netanyahu said any solution to the crisis would need to see Hamas stripped of its weapons.

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Israeli soldiers take positions near Kibbutz Nahal Oz, outside the northern Gaza Strip, during a gun …

"The process of preventing the armament of the terror organization and demilitarization of the Gaza Strip must be part of any solution. And the international community must demand this forcefully," he said.

Hamas said its forces had infiltrated Israel to retaliate for the killing of the children in a beach camp.

Tension between Netanyahu's government and Washington has flared over U.S. mediation efforts, adding yet another chapter to the prickly relations between the Israeli leader and Obama.

Repeated U.S.-led negotiations over 20 years have failed to broker a permanent peace deal. The most recent round collapsed in April, with Palestinians livid over Jewish settlement building in the occupied West Bank and Israelis furious that Western-backed Palestinian President Mahmoud Abbas had signed a unity pact with old foe Hamas.

Qatari Foreign Minister Khaled Al-Atteya said Israel had not respected a ceasefire agreement brokered by Cairo that ended the last Gaza war in 2012 and it was time the blockade of the coastal enclave - also enforced by next-door Egypt - was lifted.

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An Israeli tank manoeuvres outside the northern Gaza Strip July 28, 2014. REUTERS/Amir Cohen

Israel has signaled it wants a de-facto halt to fighting rather than an agreement that would preserve Hamas's arsenals and shore up its status by improving Gaza's crippled economy.

The main U.N. agency in Gaza, UNRWA, said more than 167,000 displaced Palestinians had taken shelter in its schools and buildings, following repeated calls by Israel for civilians to evacuate whole neighborhoods ahead of military operations.

"His threats do not frighten either Hamas or the Palestinian people, and the (Israeli) occupation will pay the price for its massacres against children and civilians," Hamas spokesman Sami Abu Zuhri told Reuters.

Speaking in New York, U.N. Secretary-General Ban Ki-moon deplored what he described as a lack of resolve among all parties in the conflict.

"It's a matter of their political will. They have to show their humanity as leaders, both Israeli and Palestinian," he told reporters. "Why these leaders are making their people to be killed by others? It's not responsible, (it's) morally wrong."

Ban noted that "all sides must meet all obligations under international humanitarian law, both towards civilians ahead of impending attacks, as well as maintaining proportionality in any kind of military response."

(Additional reporting by Michelle Nichols in New York, Writing by Ori Lewis; Editing by Lisa Shumaker)

• Unrest, Conflicts & War
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Doomed South Korean ferry boss's driver turns himself in

SEOUL (Reuters) - The driver of the South Korean businessman wanted over the sinking of a ferry that killed more than 300 people in April turned himself in on Tuesday, potentially unlocking the mystery of the man's final days after the disaster.

Prosecutors in the port city of Incheon said the driver, Yang Hoe-jung, turned himself in at their office, which is leading the investigation into the role of businessman Yoo Byung-un in the sinking of the ferry Sewol.

The structurally defective and heavily overloaded ferry capsized and sank on a routine journey on April 16, killing 304 people, 250 of them teenagers from the same school on a class field trip. Twelve of their teachers were also killed.

The trial of 15 surviving crew members, including the captain, resumed on Monday with evidence from some of the 75 teenagers who survived South Korea's worst maritime disaster.

The crew members face charges ranging from homicide to negligence for abandoning the ship after telling passengers, including the teenage students, to remain on board.

Yang is thought by authorities to have been with Yoo, the head of a family that ran a network of companies that included the ferry operator, in the days before his body was found by a farmer at an orchard on June 12.

Police only identified the badly decomposed body as that of Yoo last week, although an autopsy and other extensive testing failed to indicate how he died or came to be in the orchard, forensic experts have said.

The driver Yang was the last among a group of people close to Yoo who had been wanted for allegedly helping him elude South Korea's biggest manhunt.

Yoo was accused of a range of questionable activities that included embezzlement and negligence that prosecutors believe led to the ferry disaster.

A reward of 500 million won ($488,000) had been posted for information leading to his arrest, the largest possible amount under South Korean criminal law.

Yoo's wife, brother and oldest son have been arrested but his younger son remains at large and is believed to be in the United States.

A senior prosecutor has said efforts have been made to work with U.S. law enforcement authorities to capture Yoo Hyuck-ki, who was considered Yoo's heir-apparent.

Some of the surviving children who testified at the trial on Monday said there was little help from coast guard rescuers who arrived at the scene as they scrambled out of the sinking ferry, with many of their classmates still trapped inside.

($1 = 1025.2000 Korean Won)

(Reporting by Ju-min Park; Writing by Jack Kim; Editing by Paul Tait)

• Society & Culture
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U.S.-Israeli tensions rise as hostilities in Gaza subside

By Nidal al-Mughrabi and Dan Williams

GAZA/JERUSALEM (Reuters) - Israel sees no need for another Gaza ceasefire, an Israeli official was quoted as saying on Monday, as tensions between Prime Minister Benjamin Netanyahu's government and Washington flared over U.S. mediation to end the almost three-week-old war.

Fighting had subsided over the weekend, with the battered Palestinian enclave's dominant Hamas Islamists endorsing a U.N. call for a 24-hour halt ahead of Monday's Eid al-Fitr festival.

Yet Israel balked, having abandoned its own offer to extend a 12-hour truce from Saturday as Palestinian rocket launches persisted. Netanyahu's security cabinet met into the early hours of Monday to debate proposals including for an escalation of the Gaza offensive in which almost 1,100 people have died.

U.S. Secretary of State John Kerry visited the region last week to try to stem the bloodshed, his contacts with Hamas - which Washington formally shuns - facilitated by Egypt, Turkey, Qatar and Western-backed Palestinian President Mahmoud Abbas.

Israel wants Egypt, which also borders the Gaza Strip and views Hamas as a security threat, to take the lead in curbing the Palestinian Islamists. It worries about Doha and Ankara championing Hamas demands to open up the blockaded territory.

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A Palestinian man salvages belongings from damaged buildings in the Shejaia neighbourhood, which wit …

A flurry of media leaks by unnamed Israeli officials damning a draft agreement attributed to Kerry as too accommodating of Hamas was challenged by a U.S. official who, also anonymously, told reporters the top diplomat's efforts had been mischaracterized.

But U.S. President Barack Obama, phoning Netanyahu on Sunday, put pressure on Israel to hold fire unconditionally and appeared to link its core demand for Hamas to be stripped of cross-border rockets and infiltration tunnels to a peace accord with the Palestinians that is nowhere on the diplomatic horizon.

"The President stressed the U.S. view that, ultimately, any lasting solution to the Israeli-Palestinian conflict must ensure the disarmament of terrorist groups and the demilitarization of Gaza," the White House said.

It added that while Obama wanted any truce to be along the lines of an Egyptian deal that ended the last Gaza war, in November 2012, the United States also supported "regional and international coordination to end hostilities".

Israel did not immediately respond nor publish what, if anything, was decided at the overnight security cabinet session.

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Israeli soldiers rest next to an armoured personnel carrier (APC) at a staging area outside the nort …

But Israel Radio quoted an unidentified government official as saying: "There is no need for any more ceasefires. Let Hamas stop firing first."

ISRAEL LINKS GAZA RELIEF TO DISARMING HAMAS

That signaled preference for a de facto mutual halt to fighting rather than any agreement preserving Hamas's arsenals and shoring up its status by improving Gaza's crippled economy.

Two decades of Israeli-Palestinian peace negotiations have made little progress and been frequently interrupted, most recently in April when Netanyahu called off talks overseen by Kerry in response to Abbas's surprise power-share with Hamas.

Speaking earlier on Sunday, Netanyahu sounded open to easing conditions for the Gaza Strip's 1.8 million Palestinians but said this must be "intertwined" with disarming Hamas.

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Israeli soldiers prepare armoured personnel carriers (APCs) at a staging area outside the northern G …

"I think you can't get social and economic relief for the people of Gaza without having an assured demilitarization," he told CNN.

Israeli air, sea and ground attacks have killed some 1,031 Palestinians, mainly civilians and including many children, Gaza officials say. Israel says 43 of its soldiers have died, along with three civilians killed by rocket and mortar fire from Gaza.

A poll published by Israel's Channel 10 television on Sunday said some 87 percent of respondents wanted Israel to continue the operation until Hamas was toppled. Another poll, published in the Jerusalem Post newspaper, found that 86.5 percent of Israel's majority Jews opposed calling a truce while rocket fire continued and Gaza retained any of the cross-border tunnels.

Israel says the Palestinians have lost around half of their rockets during the fighting - an account disputed by Hamas - and that army engineers have located and destroyed most of the tunnels from the territory. Those excavations will continue under any short-term truce, Israel says.

The main U.N. agency in Gaza, UNRWA, said 167,269 displaced Palestinians have taken shelter in its schools and buildings, following repeated calls by Israel for civilians to evacuate whole neighborhoods ahead of military operations.

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People carry a casket holding the body of Palestinian Christian woman Jalila Faraj Ayyad, whom medic …

But residents of villages near the southern town of Khan Younis on Sunday attacked offices of the International Committee of the Red Cross, torching furniture and causing damage. They said the organization had not done enough to help them.

During the lull in fighting inside Gaza on Sunday, residents flooded into the streets to discover scenes of massive destruction in some areas, including Beit Hanoun in the north and Shejaia in the east.

An Israeli official said the army hoped the widespread desolation would persuade Gazans to put pressure on Hamas to stop the fighting for fear of yet more devastation.

The Gaza turmoil has stoked tensions amongst Palestinians in mainly Arab East Jerusalem and in the occupied West Bank, which Abbas governs in uneasy coordination with the Israelis.

Medics said eight Palestinians were killed on Friday in incidents near the West Bank cities of Nablus and Hebron - the sort of death toll reminiscent of previous anti-Israel revolts.

(Writing by Dan Williams; Editing by Paul Simao)

• Politics & Government
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More than 50 killed in Benghazi, Tripoli clashes

By Feras Bosalum and Ayman al-Warfalli

BENGHAZI/TRIPOLI (Reuters) - At least 36 people were killed in Libya's eastern city of Benghazi where Libyan Special Forces and Islamist militants clashed on Saturday night and Sunday morning, medical and security sources said.

The government said more than 150 people have died, many of them civilian, in the capital Tripoli and Benghazi in two weeks of fighting as clashes forced U.S. and foreign diplomats to pull out of the country.

In Tripoli, 23 people, all Egyptian workers, were killed when a rocket hit their home on Saturday during fighting between rival militias battling over the city's main airport, the Egyptian state news agency reported.

Since the clashes erupted a fortnight ago, 94 people have died in the capital, and more than 400 have been injured as militias exchanged rocket and artillery fire across southern Tripoli, the health ministry said.

Another 55 people, mostly civilians, have been killed in Benghazi since the clashes have intensified over the last week between regular forces and Islamist militants who are entrenched in the city.

"Most of the victims we have noticed are civilians as the fighters have their own hospitals on the battlefield," a Benghazi medical source told Reuters.

Fuel storage tanks that supply Tripoli were hit on Sunday by rockets igniting a huge fire near the international airport, the National oil corporation (NOC) said.

"It is a tank of 6 million liters of gasoline and it is close to others containing gas and diesel," NOC spokesman Mohamed al-Alharari said. "The firefighters are trying to counter the fire but if they cannot, a big disaster will happen" he added.

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Black plumes of smoke is seen in the vicinity of Camp Thunderbolt, after clashes between militants,  …

DEEP CONCERNS

In the last two weeks, Libya has descended into its deadliest violence since the 2011 war that ousted Muammar Gaddafi, with the central government unable to impose order.

The United States, the United Nations and Turkey have pulled their diplomats out of the North African country.

The United States evacuated its embassy on Saturday, driving diplomats across the border into Tunisia under heavy military protection because of Tripoli clashes near the embassy compound.

A British embassy convoy was hit by gunfire during an attempted hijacking outside the capital Tripoli on the way to the Tunisian border, but no-one was injured in the incident, an embassy official said on Sunday.

"It was an attempted hijack as the convoy was on its way to the Tunisian border," the official said. "No one was injured but vehicles were damaged."

On Sunday, shelling continued in Tripoli around the international airport that is controlled by militias from the western city of Zintan. More Islamist-leaning rival brigades are trying to force them from the airport, which Zintanis have controlled since the fall of Tripoli.

But clashes were far heavier in Benghazi overnight, where regular army and air force units have joined with a renegade ex-army general who has launched a self-declared campaign to oust Islamist militants from the city.

A source from the Special forces fighting Islamist militants in Benghazi told Reuters clashes involved warplanes hitting militant positions belonging to Ansar al Sharia and another group in the city.

Libya's Western allies worry the OPEC country is becoming polarized between the two main factions of competing militia brigades and their political allies, whose battle is shaping the country's transition.

Special envoys for Libya from the Arab League, the United States and European countries expressed their concerns about the situation in Libya, saying it had reached a "critical stage" and called for an immediate ceasefire.

"The UN should play a leading role in reaching a ceasefire in conjunction with the Libyan government and other internal partners, with the full support of the international envoys," a statement issued after a meeting in Brussels said.

A new Libyan parliament was elected in June and Western governments hope warring parties may be able to reach a political agreement when the lawmakers meet in August for the first session.

But three years after Gaddafi's demise, Libya's transition to democracy has been delayed by political infighting and militia violence. Armed groups have also targeted the oil industry to pressure the state.

(Additional reporting by Ahmed Elumami in Benghazi; Writing by Aziz El Yaakoubi; Editing by Patrick Markey, Angus MacSwan and David Evans)

• Unrest, Conflicts & War
• Politics & Government
• Libya
• Islamist militants

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Fighting complicates Ukraine crash probe, U.S., EU prepare Russia sanctions

By Aleksandar Vasovic

DONETSK Ukraine (Reuters) - Fierce fighting in eastern Ukraine where a Malaysian airliner was downed further complicated an investigation on Sunday as Europe and the United States prepared economic sanctions on Russia over the conflict.

At least 13 people were killed in clashes between Ukrainian troops and pro-Russian rebels that raged in five areas around the wider region.

International monitors said they had abandoned plans to visit the crash site because of fears it was not safe, even though Malaysia said earlier that rebels had agreed to provide access.

Ukraine said it was trying to dislodge the rebels, but denied it was fighting near the crash site, saying the separatists had put the monitors off by falsely claiming that the army was operating nearby.

Russia dismissed U.S. allegations it was about to hand over more missiles to the separatists, who Western leaders say almost certainly shot the airliner down by mistake with a Russian-supplied surface-to-air missile.

The separatists deny any involvement and Moscow says it has not supplied them, suggesting Ukrainian forces were to blame.

"Kiev is trying to destroy the evidence of a crime by its army," separatist leader Aleksander Borodai said, referring to a Ukrainian army offensive some distance from the site on Sunday.

With European states trying to minimize the impact of any future sanctions against Russia on their own economies, the U.S. State Department sought to bolster the case for robust action by releasing images it said showed Russian forces had fired across the border at the Ukrainian military in the last week.

The images, which show marks on the ground at what the State Department said were launch sites and impact craters around Ukrainian military locations, indicated fire from multiple rocket launchers, the department said.

It also said the images offered evidence that Russia-backed separatists inside Ukraine had fired on Ukrainian forces using heavy artillery supplied by Russia.

The Russian Foreign Ministry said Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry had agreed on the need to ensure a swift ceasefire in what it described as an "internal conflict".

But the State Department said Kerry did not accept Lavrov's denial that heavy weapons from Russia were contributing to the conflict and urged him "to stop the flow of heavy weapons and rocket and artillery fire from Russia into Ukraine, and to begin to contribute to deescalating the conflict."

Kerry also underlined U.S. support for a mutual cease-fire verified by the Organization for Security and Cooperation in Europe and reaffirmed Washington's "strong support for the international investigation" into the downed airliner, the State Department statement added.

MORE MISSILES?

Washington said on Friday another transfer from Russia to Ukrainian separatists, this time of heavy-caliber multiple-launch rocket systems, appeared to be imminent and that Russian forces were slowly building up along the Ukrainian border.

Russia said recent international inspections had revealed no evidence of Russian military violations, without giving details.

Members of the European Union, spurred into action by the deaths of 298 people in the airliner, were expected to try to reach a final deal on Tuesday on measures including closing the bloc's capital markets to Russian state banks, an embargo on arms sales and restrictions on dual-use and energy technologies.

The EU added new names on Friday to its list of individuals and companies facing travel bans and asset freezes over their alleged involvement in Ukraine and could agree to extend the list further as early as Monday.

Washington, which has taken the lead in imposing individual and corporate penalties on Russia, said on Friday it was likely to follow up on any new EU move with more sanctions of its own.

The Ukrainian government said its forces were advancing towards the crash site to try to free it from the rebels, who have impeded the work of international monitors and whom Kiev accuses of tampering with evidence pointing to who shot it down.

Only a few international experts have so far been able to get to the site, access to which is negotiated with the rebels.

"All our troops are aiming to get there and liberate this territory so that we can guarantee that international experts can carry out a 100-percent investigation of the site and get all proof needed to deduce the real reason for this tragedy," said Andriy Lysenko, a spokesman for Ukraine's Security Council.

International monitors said the fighting itself could affect the crash site, underlining the growing complexity of trying to establish who shot down Malaysia Airlines flight MH17.

In Donetsk, Alexander Hug, deputy head for the OSCE monitoring mission in Ukraine, said monitors would not visit the site on Sunday.

"The situation on the ground appears to be unsafe ... we therefore decided to deploy tomorrow morning," Hug, flanked by Dutch and Australian experts, told reporters. "Fighting in the area will most likely affect (the) crash site," Hug said.

An OSCE spokesman said the group would try again on Monday.

The separatists are still in control of the area where the plane was shot down earlier this month but fighting in the wider eastern regions of Donetsk and Luhansk has been heavy as Ukrainian government forces try to drive them out.

It was raging in at least five places on Sunday and Donetsk region health officials said 13 people were killed in fighting in the town of Horlivka, known as Gorlovka in Russian.

Lysenko said troops were advancing east from the town of Makievka towards Shakhtarsk, around 25 km (16 miles) from the crash site. Shakhtarsk residents said air strikes hit the town.

"Our military is advancing, fighting goes on every day, every night, they have already liberated two-thirds of the territory," Lysenko told a news conference in Kiev.

But Ukrainian Foreign Minister Pvalo Klimkin said the Ukrainian army was respecting a no-fight zone within 20 kilometers from the site.

AGREEMENT

Earlier, Malaysian Prime Minister Najib Razak said an agreement reached with separatist leader Borodai would "provide protection for international crash investigators" to recover human remains and ascertain the cause of the crash.

The OSCE has provided a team to monitor the site in advance of an investigation, but Najib said a full team of investigators was needed to ensure any human remains left there were removed.

"We also need a full deployment of investigators to have unfettered access to the crash site so we can understand precisely what happened to MH17. I hope that this agreement with Mr Borodai will ensure security on the ground, so the international investigators can conduct their work," he said.

"Three grieving nations", Malaysia, Australia and the Netherlands, had formed a police group to secure the site, he said in a statement issued by his office. The Netherlands and Australia said the mission would not be armed.

Among the 298 people who died aboard the Boeing 777 on its flight from Amsterdam to Kuala Lumpur on July 17 were 193 Dutch nationals, 43 Malaysians and 28 Australians.

Malaysian experts have said they believe at least 30 investigators will be required to cover the full site of the crash, in addition to Dutch investigators and an expert from the United Nations' civil aviation body, the ICAO.

In the Australian capital, Canberra, Prime Minister Tony Abbott said an unarmed police mission led by the Netherlands and made up of about 49 officers would travel to the site. Officials said a total of 170 Australian police were deployed in Ukraine.

Abbott, who has played a leading role in pressing for an investigation, told reporters the force would probably stay no longer than three weeks. "Our objective is to get in, to get cracking and to get out," he said.

(Additional reporting by Natalia Zinets, Lina Kushch, Gabriela Baczynska and Elizabeth Piper in Kiev, Emily Stephenson and Steve Holland in Washington, Yantoultra Ngui in Kuala Lumpur and Morag Mackinnon in Perth; Writing by Philippa Fletcher; Editing by Anna Willard, Peter Cooney and Sandra Maler)

• Politics & Government
• Russia
• DONETSK Ukraine
• State Department

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Liberia shuts border crossings, restricts gatherings to curb Ebola spreading

MONROVIA (Reuters) - The Liberian government on Sunday closed most of the West African nation's border crossings and introduced stringent health measures to curb the spread of the deadly Ebola virus that has killed at least 660 people across the region.

The new measures announced by the government on Sunday came as Guinea, Liberia and Sierra Leone struggle to contain the worst outbreak yet of the virus.

Speaking at a task force meeting, Liberia President Ellen Johnson Sirleaf said the government is doing everything to fight the virus including inspecting and testing all outgoing and incoming passengers by Liberia's airport authority.

"All borders of Liberia will be closed with the exception of major entry points. At these entry points, preventive and testing centers will be established, and stringent preventive measures to be announced will be scrupulously adhered to," she said.

Ebola can kill up to 90 percent of those who catch it, although the fatality rate of the current outbreak is around 60 percent. Highly contagious, especially in the late stages, its symptoms include vomiting and diarrhea as well as internal and external bleeding.

Under the new measures, public gatherings such as marches, demonstrations and promotional advertisements also will be restricted.

The outbreak has placed a great strain on the health systems of some of Africa's poorest countries.

"No doubt, the Ebola virus is a national health problem. And as we have also begun to see, it attacks our way of life, with serious economic and social consequences," Sirleaf said in a statement.

Still, despite efforts to fight the disease, the virus continues to spread. A 33-year-old American doctor working for relief organization Samaritan's Purse in Liberia tested positive for the disease on Saturday.

The charity said on Sunday a second American, who was helping a team treating Ebola patients at a case management center in Monrovia had also tested positive.

Samuel Brisbane, a senior Liberian doctor, who was also treating infected patients has died after contracting the virus, authorities said on Sunday. In Nigeria's commercial capital Lagos, a Liberian man who tested positive died in on Friday.

(Reporting by Clair MacDougall; Writing by Bate Felix; Editing by Diane Craft)

• Health
• Disease & Medical Conditions
• Liberia
• Liberian government

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Associate of dead South Korea ferry boss arrested, children due to give evidence

By Ju-min Park

ANSAN South Korea (Reuters) - A close associate of the man whose web of business holdings included a ferry that sank and killed more than 300 people in April was arrested on Monday, a week after the ferry owner's badly decomposed body was identified.

The woman, who was believed to have been instrumental in helping Yoo Byung-un elude South Korea's largest manhunt, turned herself in on Monday. Police identified her only by her last name, Kim.

Another woman, the wife of Yoo's driver who was thought to have been with him during his final days at large, also turned herself in to police.

The ferry Sewol capsized on a routine trip on April 16, one of South Korea's worst civilian maritime disasters. Many of those killed were children from the same school on a class trip.

The detention of the two women, confirmed by a prosecutor, comes as some of the students who made it out of the ferry alive were due to take the stand at the trial of 15 crew members who fled the vessel.

Passengers on board the ferry, many of them children, had been told to stay on board while it was sinking.

The 15 surviving crew members, including the captain, face charges ranging from homicide to negligence for abandoning the ship ahead of the passengers. Video footage of their escape triggered outrage across South Korea.

Yoo heads the family that owned the ferry operator.

His associate, Kim, had been wanted for helping Yoo evade arrest. Her arrest came three days after police stormed an apartment on the outskirts of Seoul and found Yoo's elder son, Dae-gyun, who was wanted for embezzlement.

Yoo Dae-gyun is one of two sons who co-owned the holding company at the center of a network of business interests that included the ferry operator.

He was not believed to have been as actively involved in management as his younger brother, who is believed to be in the United States.

Yoo Dae-gyun said he only learned of his father's death from police.

A badly decomposed body found by a farmer at an orchard last month was identified only six days ago as that of Yoo Byung-un. An autopsy and DNA testing failed to show how he died and how he came to be at the site where he was found because of extensive decomposition.

(Writing by Jack Kim; Editing by Paul Tait)

• Society & Culture
• Crime & Justice
• South Korea

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